Gov. Rick Snyder is welcomed to the podium to give his State of the State speech in the House Chamber at the Capitol in Lansing, Mich. Wednesday, January 16, 2013.Chris Clark | MLive.com

LANSING, MI — Gov. Rick Snyder has placed increased focus on the regulation and support of Michigan’s insurance companies and banks with the creation of a new state department.

Snyder established the Department of Insurance and Financial Services (DIFS) through an executive orderthat takes effect in 60 days. He announced the move in his State of the State address on Wednesday.

The department will take over the functions that have been covered by the Office of Financial and Insurance Regulation (OFIR), which is part of the Department of Licensing and Regulatory Affairs.

“Insurance and financial service businesses are a vital part of the overall economic health of Michigan,” Snyder said in a statement. “By establishing a new department dedicated to industry sustainability it further emphasizes the commitment to removing red tape from economic growth in Michigan. This order will also go a long way toward creating and enforcing appropriate regulations, so we have robust consumer protections in place.”

The elevation from an office to a department means that DIFS Director Kevin Clinton (current OFIR commissioner) will be in a cabinet-level position that reports to the governor, said Snyder spokesman Caleb Buhs.

OFIR has a staff of more than 350 people who regulate banks, credit unions, insurance and mortgage companies in Michigan. The office is funded by revenue from fees it imposes. The budget for the new department may increase minimally for certain expenses, Buhs said. It’s unknown how the structure change will impact staffing levels.

The move garnered support from several trade organizations.

"We applaud and support moving OFIR essentially from its bureau status to a full departmental level. That elevates the stature of the industry oversight," said Dennis Koons, president and CEO of the Michigan Bankers Association.

Koons said he's also pleased to hear Snyder talk about his goal of promoting job growth in finance and insurance companies.

Lori Conarton, spokeswoman for the Insurance Institute of Michigan, said she hopes that DIFS can act like other departments, such as the Department of Agriculture, that not only regulate their industries but promote them as well. The institute represents that represents property-casualty insurance companies

“The insurance industry is a stable industry here in Michigan,” she said. “It’s a high-wage industry, and we think that we can grow it and encourage more companies to come here.”

The insurance and financial service sectors employ more than 150,000 people in Michigan, generating more than $9 billion a year in wages and salaries. More than 300 banks and credit unions and nearly 150 insurance companies are based in Michigan. Another 1,500 out-of-state insurers do business here.

Members of the Coalition Protecting Auto No-Fault hope that with the new department, the insurance commissioner will get more regulatory powers over insurance rates.

“For years, CPAN has called on the Insurance Commission to be given stronger powers to approve auto insurance rates and issue refunds if necessary,” CPAN President John Cornack said in a statement. “The Public Service Commission does just that for utilities – another product that nearly everyone in Michigan must buy – and auto insurance should be no different.”

Auto insurance companies must file their rates with OFIR and the commissioner has 60 days to deny them. But in order to deny a rate increase, he must prove that there’s no competition available.

Conarton, of the Insurance Institute, said more restrictive rate approvals would hurt competition, especially since some other states are enacting even more flexible rate regulations.

Along with the new department, Snyder touched on two other insurance issues in his State of the State speech on Wednesday.

He plans to create an authority to curb auto insurance fraud by providing financial assistance to local prosecutors and law enforcement. It will be funded through a $2 per vehicle assessment on insurance companies.

Snyder also renewed his call to reform Michigan’s no-fault auto insurance system, a controversial measure that never came up for a vote in the previous session.